Case Study: Cost Segregation Analysis for a Retail Building in Suffolk, VA

Narrative

In 2024, the owners of a standalone retail building in Suffolk, Virginia, engaged in strategic tax planning to optimize their investment. The property consists of a single-story retail building encompassing approximately 14,600 square feet. Constructed in 2024, the building features modern retail space with supporting facilities.

The building's exterior showcases a blend of contemporary materials, including metal sandwich panels, brick veneer, and storefront glass systems. The interior includes well-appointed amenities such as modern electrical systems, plumbing fixtures, and a comprehensive fire protection system. The property also includes significant site improvements such as asphalt paving, concrete sidewalks, and professional landscaping.

Objective

The primary objective of the cost segregation study was to identify and reclassify building components into appropriate tax recovery periods to optimize depreciation benefits. The total depreciable basis of $4,604,050 was analyzed to maximize tax advantages through accelerated depreciation schedules.

Methodology

ETS employed a detailed, engineering-based approach, which included:

1. Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
2. Document Review: examining architectural plans, construction documents and accounting records
3. Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
4. Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)

Asset Allocation